How to Start Buying Wholesale for Small Businesses
I always aim to spend as little on my business expenses such as supplies and inventory. It helps in minimizing my expenses and maximizing my profits. It’s something everyone knows and does as best as they can.
However, you can’t just eliminate all your expenses with a snap of a finger, because you won’t have anything to sell. You can only reduce your costs by landing better wholesale deals.
Wholesalers provide products to businesses in large quantities. Most businesses that buy in bulk often do it in wholesale. It allows them to stock up on the supplies they need to keep their business running.
Because almost every wholesaler distributes their products on a massive scale, small businesses might find it difficult to land a good deal. But, buying products in wholesale is still a possibility.
Types of Wholesalers
There are many different types of wholesale vendors in the business world. They usually differ in their business model and their prices.
Manufacturers distribute their products to retailers. If you’re looking to buy niche products, manufacturers are your best bet.
Manufacturers provide sole rights to exclusive distributors to distribute their products. These distributors usually sell their products to a select number of retailers or split them among smaller wholesale businesses.
Regional Distributors or Wholesalers
Wholesalers and regional distributors receive their products from exclusive distributors or the manufacturers themselves. They then split them across smaller retail businesses.
Choosing the Right Wholesaler
When I was just starting out, I could only afford to take small orders with not too big profits. But I did my best to move further down the chain to get them.
Every time the product passes under someone’s hand, the price elevates. The closer you can get to larger wholesalers, the better deals you’ll be able to land. That will translate into bigger profits.
How to Find the Best Wholesalers for your Business
It took me a lot of time, energy and frustration to finally find the right wholesale businesses. But, it definitely paid off in the long run.
Here’s where you find good wholesalers:
- Trade Shows– Wholesalers and manufacturers set up display booths where you can check out their products. It’s basically like a festival for business people. You can meet wholesalers’ representatives and get their prices.
- Industry Magazines – You can have industry magazines sent to your door, in which wholesalers provide their contact information.
- Manufacturers – Giving a phone call to a manufacturer is always worth a try. They might be willing to directly sell their products to you. If they won’t, then ask for their distributor’s contact information.
- Others in Your Industry – Try to contact business owners who aren’t direct competitors. They might be willing to share their wholesaler’s number with you.
Signing a Wholesale Contract
When making a deal for buying items in wholesale, you must sign a contract. I always had a lawyer with me to help out with that. It’s important to review every word in that contract with someone qualified.
The following terms are written in such a contract:
- Minimum order size –The wholesaler usually demands a minimum number of products that I have to buy in every order. I almost got stuck with large inventories because of this. So, I make sure that it’s lower than what I usually need.
- Discounts – I’m able to save money when I’m ordering an unusually large quantity of products. The wholesale contract has the details regarding when these discounts apply.
- Delivery time schedules – This will set how soon I will be able to receive the delivery and how.
- Return policies – Nobody should get stuck with a large order that they’re not satisfied with. So, I always look for a return policy in an agreement.
The per-price of wholesale products always smaller than the retail price of individually sold products. I simply don’t have to pay the market price when I’m buying wholesale. I pay a lot smaller wholesale price when I’m buying products in bulk.
Most products have different wholesale prices, depending on who’s buying it. It’s just a game of numbers. A business that buys 5000 T-shirts will pay less than the one that buys 500.
A general rule of the thumb is, the more products I buy, the more inexpensive they get.
Keeping Track of Wholesale Deals in Your Accounting Book
There’s a lot of money on the table and I track every penny of it. This is something that nobody can avoid if they want to run a good business. However, it’s quite simple because I just record wholesale purchases like any other purchase.
Manually recording everything will be hard to track, not to mention that it’s a lot of work. So, it’s important that you use some kind of accounting software to make your job easier.